In the Wall Street Journal (WSJ) article dated May 10, 2020, the Journal highlights some of the rapid changes occurring in the life insurance industry. The author implies that US insurers are turning away business that they normally might accept; and the reasons can be traced back to the impact of the Covid-19 virus on the economy and the mortality of individuals who have contracted the virus. While one of the economic impacts of the Covid-19 virus has been the exacerbation of a 20-year trend – the continued low interest rate environment which shows no signs of abating in the near future, insurance companies have been grappling with this issue for several years.
In this market environment, client representation is absolutely critical. The insurance advisor must be able to access the broader market to ascertain which insurance companies and products make the most sense given a client’s individual circumstances. A “one size fits all” approach doesn’t make sense and should not be accepted. Carriers are constantly assessing their risks, and making changes to their products, processes, and underwriting. Some of the transitions that are occurring now can be described as a “knee jerk” reaction and are likely to be temporary. In fact, we have already seen instances where insurance companies have postponed accepting applications for certain advanced ages, and then reinstated their willingness to do so. The insurance advisor must have the resources to stay abreast of these changes and advise the client accordingly.
Despite the current economic turmoil, it’s important to remember the following about the life insurance industry:
• The life insurance industry continues to accept new clients at a robust pace.
• The industry is well capitalized and continues to pay claims.
• Those claims represent tax advantaged liquidity at times when families and businesses need and desire them most.
• There are no pandemic exclusions for payment of claims.
• Enhanced and accelerated underwriting programs are emerging, making the onboarding process much easier and less time consuming.
• HNW individuals, families, and corporate entities can still take advantage of select risk pools that offer products with superior pricing.
The life insurance industry, like any other during these turbulent times, is adjusting to the new realities all of us face. Financially, they are well positioned to do so. Clients should remain confident in the strength of the industry, and with appropriate representation, clients will have access to the insurance products and companies that best suit their needs.